It really sounds good to the ear when you listen to someone talking about ideas that allow you to make money without grinding from 9 to 5. After all, earning a stable passive income is a strategy used by many successful millionaires.
With passive income, there is no more going to the office or being fully hands-on with your investment; you just put your money in an investment asset and let it grow.
However, many people misinterpret the concept of passive income. While youre not doing difficult work to build your wealth, it does require time and effort. With that in mind, if you’re interested in finding ways to earn passive income, here are six suggestions for your consideration:
Investing in peer-to-peer (P2P) lending is a way to make money without having to work. Most P2P platforms allow you to invest in various loans. Your investment will be lent out to people who want to borrow money using a P2P platform. The success and risk of this type of investment are largely based on the loan type in which you choose to invest
One advantage of investing in P2P lending is that you dont have to spend a fortune to start. You can put in as little as $20 in the type of loan you choose to invest. Its okay to invest a big amount for a big loan, but its wise to diversify your investment by putting small amounts of money in different loans.
Another good type of passive investment is dividend stocks. Many companies in the stock market pay investors regular dividends, which can be a good source of passive income. Just imagine if you increase your shares as time goes by, you can make significant profits from investing in dividend stocks.
Your investment is doing well if your dividend-paying stocks are increasing in value and making a profit. But while this investment can provide you with passive income, you also need to be wary of its risks. For example, its risky to invest in stocks that pay high dividends because the company is more likely to lose by giving more to investors instead of focusing on growing the company. Its better to invest in stocks from a company with long-term financial goals. You also have to put into the picture the possibility of market crashes when investing in dividend stocks.
The volatility of traditional markets like the stock market steers investors into alternative investment markets. Nowadays, investors are venturing into commodities like geeky collectibles, hedge funds, and private equity because they are not too risky. This strategy can be a good route for people who have reservations about investing in traditional markets.
One benefit of investing in alternative investments is that you can build passive income by putting your money on unique asset classes. However, alternative assets can still be risky due to a lack of regulations.
Long-Term Index Funds
Investors who want to build a long-term passive investment should venture into index investing. This type of investment is composed of different assets, and you have two options for this type of investment. You can put your money in total market index funds composed of different stores in the stock market, or you can opt for index funds that deal with a specific industry.
The advantage of index funds is that they have minimal risks due to the diversity of assets that you can choose to invest. It also has affordable costs because of its straightforward rules of owning assets.
Passive Real Estate Investing
Many investors have a desire to invest in real estate, but not all of them have the time, effort, and money to become active investors. Thanks to real estate investment trusts (REITs), you can now make passive income by investing in real estate without the need to manage real estate properties.
With REITs, you can invest your money and build passive income-generating investments. Pick a REIT company that focuses on real estate projects with minimal risks, such as multi-family housing.
High-Interest Savings Account
Savings accounts are not considered investments; they’re meant to protect your money. That being said, although they dont provide high yields like other investments, they do offer a small return; high-interest savings accounts currently pay an annual interest of approximately 0.70%. Compare that to regular savings accounts, where many banks are currently offering just 0.08%.
Its wise to set your mind on investment goals. Investments can provide you with passive income that can help you make money and build your wealth over time. If you have plans to invest your money, you can invest your money in alternative assets, long-term index funds, dividend stocks, peer-to-peer lending, REITs, and/or high-interest savings accounts.
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